If you've already set up a Keogh retirement plan, be sure to make a contribution before April 15 for the 2001 tax year. For 2001, the self-employed can contribute up to 25 percent of their compensation and deduct it from current taxable income.
But if you don't have a Keogh plan, consider a SEP-IRA. "SEPs are one of the most common types of retirement plans used by self-employed people because of the ease of administration and high contribution limits," says Paul Gada, a tax analyst with CCH Business Owner's Toolkit, a division of Riverwoods, Illinois, tax and business law information provider CCH Inc. For 2001, the contribution limits for a self-employed person are about 13 percent of his or her net earnings.
You can also reduce income for 2001 up to $3,000 by claiming net capital losses on investments that took a hit in 2001. Losses over $3,000 can be carried forward to 2002, says Gada.
Can't pay all the taxes you owe? The IRS recommends filing on time and paying as much as you can. Also consider an installment plan. Go to the IRS Web site (www.irs.gov) to find out whether you're eligible for an installment agreement.
Finally, check with your accountant to make sure you've taken all the deductions and credits for which you qualify.
Great Falls, Virginia, writer Joan Szabo has reported on tax issues for more than 15 years.
- CCH Business Owner's Toolkit
(847) 267-2743, www.toolkit.cch.com